Relief Rally Ends...

The Dow turned around right at the 7500 level as predicted, ending this relief rally in textbook style. If the Dow follows up to downside today, it will complete and confirm this classic set up. What the Dow did was a classic role reversal where the 7500 level which used to provide support back in November 2008, reversed its role and became the resistance level as short seller and breakeven sellers step in. This is a classic textbook setup that says only one thing... the bears are back in charge. In fact, we could still see increasing number of sellers as average daily volume continue rising into this bear trend. Can this market still turn around? Of course it could! In accordance to the Dow theory, we need to see how the Dow do on its next support level, which is 6500. If it rebounds from this level and challenge the 7500 point again, we could have ourselves a double bottom reversal.

This is going to be a heavyweight week as we get the durable goods order on Wednesday and GDP number on Thursday (see stock market calendar). So far, the outlook for these numbers remain gloomy, which further supports the case for the end of the relief rally.